Jealousy, Taxes and The Stock Market
What is "fairness" where taxes are concerned? Equal tax rates for all? Or a "progressive" tax rate, where the rich are taxed at a higher rate than the poor? Americans have come to accept that progressive tax rates are "fairer." But - how much more do the rich need to be taxed for "fairness?" That may have become "how much more do the rich need to be punished for being rich." For many, "fairness" has come down to punishing the more successful. To simple jealousy, in fact. How it that?
Americans have always been ambivalent about their rich. On one hand, they hate them. On the other hand, they love them and imitate them. On one hand, they need them to create jobs. On the other hand, they want to take away the "unfair" wealth that makes large-scale jobs-creating investment possible.
It's all about "fairness" for many. But what does "fairness" mean? For children, it is always getting what everyone else has. That is, they want equality of outcomes. But children eventually learn that life is not "fair." Yet they also learn that there are compensations. They may do worse than otners in some ways, but better in others. They see that we all are different. So most accept that while our outcomes may not be "fair" (equal) that so long as our opportunities are more or less equal, we still have a "fair" shot at a good life. For most, when they become adult, they accept that.
Still, when it comes time to vote, we somehow can be led around by those who want us to punish the rich. All we have learned about "fairness" of outcomes vs. "fairness" of opportunities goes right out the window.
But is there any economic reason not to keep raising the tax rates for the rich? There is! Simply, the more we raise the tax rates for the rich, the less total taxes they pay. And the more we lower the tax rates for the rich, the more total taxes they pay! Paradoxical, isn't it? If we want the rich to pay more of the total tax bill, we must lower their tax rates. And that is in order to make taxes "fairer!"
How does this work out in practice? We hate the very idea. Politicians especially hate it. Most especially of all, the Democrat Party hates it. They won't even acknowledge it. They have gone so far as to prohibit the CBO (Congressional Budget Office) from acknowledging it.*
What does all this have to do with the continuing free-fall of the stock market? Just this. Some observers point out that the post-election fall in stock prices is due to Obama's promise to raise capital gains taxes. That would fall on any profits from the sale of stocks. If stock investors sell now, they pay current tax rates. If they wait, they will pay Obama's increased tax rates. So they are selling now, in this tax year.
Some predicted accurately that this would happen. One was Dick Morris, Clinton's genius political advisor and current political commentator. He warned Obama to renounce his proposed capital-gains tax increase to stop the market from falling more. But traditional Democrat attitudes toward "fairness" get in the way, as they have before. Dick and Eileen McGann wrote yesterday:
Dick recalls vividly his meeting with Bob Rubin when he was Treasury Secretary under Clinton. Rubin opposed any cut in the capital gains tax even though he admitted that a cut in the tax would not cut, but might even augment, government revenues. Obama, himself, defended an increase as a matter of social fairness in the campaign debates when he was asked whether he favored increasing the tax even though history showed that a higher tax did not generate increased revenues.**
"Fairness?" How are higher tax rates on the rich more "fair" if they bring lower tax revenues for the benefit of all? It hurts the punishers more than the punished. The rich will remain rich, even with higher taxes. But there will be fewer jobs, and less prosperity, for the rest.*** And the stock market could continue its free-fall, punishing anyone with a pension plan. What's fair about that? Isn't it actually more a case of jealousy and resentment rather than fairness?
It would be better to try using some common sense.
_____________________
*The CBO, due to Democrat insistance, has not been allowed to reflect this in "Pay-Go" - the idea that new spending must be covered by new taxes. Since lower taxes for the rich will bring in more tax revenue, that needs to be considered in such calculations. That would be a "dynamic" estimate. But the Democrats force a "static" estimate instead, based on the idea that only higher taxes on the rich will bring in more tax revenue.
**From "Obama Must Forsake Cap Gains Hike To Stabilize Markets", Dick Morris and Eileen McGann, 11-10-08, at http://www.dickmorris.com/blog/2008/11/10/obama-must-forsake-cap-gains-tax-hike-to-stabilize-markets/#more-486.
*** How do tax cuts make the rich pay more taxes? Basically, because the rich include more of the people most gifted at making money. Tax cuts might make some of them work harder, true. But mostly, tax cuts open up new money-making opportunities "at the margin." Suddenly, some deals and investments that were not profitable before become promising. So new deals and investments increase, more profits result, more businesses are opened or expanded, more old jobs can pay more, and new jobs are opened up. The result? Everyone in the whole economy benefits. The rich get enough richer that, although they are now taxed at lower rates, they pay taxes on so much more income that their total tax bill actually goes up.
Americans have always been ambivalent about their rich. On one hand, they hate them. On the other hand, they love them and imitate them. On one hand, they need them to create jobs. On the other hand, they want to take away the "unfair" wealth that makes large-scale jobs-creating investment possible.
It's all about "fairness" for many. But what does "fairness" mean? For children, it is always getting what everyone else has. That is, they want equality of outcomes. But children eventually learn that life is not "fair." Yet they also learn that there are compensations. They may do worse than otners in some ways, but better in others. They see that we all are different. So most accept that while our outcomes may not be "fair" (equal) that so long as our opportunities are more or less equal, we still have a "fair" shot at a good life. For most, when they become adult, they accept that.
Still, when it comes time to vote, we somehow can be led around by those who want us to punish the rich. All we have learned about "fairness" of outcomes vs. "fairness" of opportunities goes right out the window.
But is there any economic reason not to keep raising the tax rates for the rich? There is! Simply, the more we raise the tax rates for the rich, the less total taxes they pay. And the more we lower the tax rates for the rich, the more total taxes they pay! Paradoxical, isn't it? If we want the rich to pay more of the total tax bill, we must lower their tax rates. And that is in order to make taxes "fairer!"
How does this work out in practice? We hate the very idea. Politicians especially hate it. Most especially of all, the Democrat Party hates it. They won't even acknowledge it. They have gone so far as to prohibit the CBO (Congressional Budget Office) from acknowledging it.*
What does all this have to do with the continuing free-fall of the stock market? Just this. Some observers point out that the post-election fall in stock prices is due to Obama's promise to raise capital gains taxes. That would fall on any profits from the sale of stocks. If stock investors sell now, they pay current tax rates. If they wait, they will pay Obama's increased tax rates. So they are selling now, in this tax year.
Some predicted accurately that this would happen. One was Dick Morris, Clinton's genius political advisor and current political commentator. He warned Obama to renounce his proposed capital-gains tax increase to stop the market from falling more. But traditional Democrat attitudes toward "fairness" get in the way, as they have before. Dick and Eileen McGann wrote yesterday:
Dick recalls vividly his meeting with Bob Rubin when he was Treasury Secretary under Clinton. Rubin opposed any cut in the capital gains tax even though he admitted that a cut in the tax would not cut, but might even augment, government revenues. Obama, himself, defended an increase as a matter of social fairness in the campaign debates when he was asked whether he favored increasing the tax even though history showed that a higher tax did not generate increased revenues.**
"Fairness?" How are higher tax rates on the rich more "fair" if they bring lower tax revenues for the benefit of all? It hurts the punishers more than the punished. The rich will remain rich, even with higher taxes. But there will be fewer jobs, and less prosperity, for the rest.*** And the stock market could continue its free-fall, punishing anyone with a pension plan. What's fair about that? Isn't it actually more a case of jealousy and resentment rather than fairness?
It would be better to try using some common sense.
_____________________
*The CBO, due to Democrat insistance, has not been allowed to reflect this in "Pay-Go" - the idea that new spending must be covered by new taxes. Since lower taxes for the rich will bring in more tax revenue, that needs to be considered in such calculations. That would be a "dynamic" estimate. But the Democrats force a "static" estimate instead, based on the idea that only higher taxes on the rich will bring in more tax revenue.
**From "Obama Must Forsake Cap Gains Hike To Stabilize Markets", Dick Morris and Eileen McGann, 11-10-08, at http://www.dickmorris.com/blog/2008/11/10/obama-must-forsake-cap-gains-tax-hike-to-stabilize-markets/#more-486.
*** How do tax cuts make the rich pay more taxes? Basically, because the rich include more of the people most gifted at making money. Tax cuts might make some of them work harder, true. But mostly, tax cuts open up new money-making opportunities "at the margin." Suddenly, some deals and investments that were not profitable before become promising. So new deals and investments increase, more profits result, more businesses are opened or expanded, more old jobs can pay more, and new jobs are opened up. The result? Everyone in the whole economy benefits. The rich get enough richer that, although they are now taxed at lower rates, they pay taxes on so much more income that their total tax bill actually goes up.
posted by Old Neocon at 8:59 AM
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